After the torrent of hype, hoohah, bullshit and ballyhoo over the past 10 years or more over the "glorious future" and "great prospects" for Internet-based companies and especially social media companies, however recent reports by various media point to problems these Internet giants are beginning to face.
About two months ago, a Russia Today report on 23 May 2018 believes that the tech "unicorn" bubble has reached its peak and that analysts believe that 80% of them are likely to fail within two years. Coined in 2013, the term "unicorn" refers to privately-owned information technology startups valued at US$1 billion or more
I first heard the term "unicorn" mentioned a lot by heads of Malaysian startups at a conference and exhibition of computing and information technology companies from across the Asia-Pacific, organised by The National ICT Industry Association of Malaysia (PIKOM) at the Sunway Pyramid Convention Centre in 2015.
At that time,these guys seemed to look towards Uber as a model of a successful startup and I heard no end of "Uber", "Uber", "Uber", "Uber" being mentioned by these speakers, so it looks like "unicorns" and "Uber" were the flavour of the day amongst them about three years ago.
Anyway, the recent Russia Today article below will tell you more about impending signs that this bubble is likely to burst.
rt.com
Silicon Valley's biggest ever tech bubble about to burst — RT Business News
23 May 2018 at 10:32
The excessive speculation in internet-based companies is worse today than during the peak of the dot-com bubble at the turn of the millennium, warns Keith Wright, a professor at the Villanova School of Business.
"It's going to be all downhill from here," he wrote in an opinion piece for CNBC. "Massive losses are coming in venture capital-funded start-ups that are, in some cases, as much as 50 percent overvalued."
The peak in the tech unicorn bubble has already been reached, he said, referring to unicorns as defined by venture capitalist Aileen Lee. The term unicorn, which was created in 2013, refers to privately-held startups valued at over $1 billion.
According to a recent study by the National Bureau of Economic Research, unicorns on average are roughly 50 percent overvalued. The research examined 135 unicorns and found that nearly half of them should be more fairly valued at less than $1 billion.
Analysts say that while most unicorn companies are not producing billions of dollars in revenue, up to 80 percent of them are set to fail within two years. The highest-valued private technology company Uber, which has rapidly growing revenue, still remains highly unprofitable. The firm's revenue was $6.5 billion as of 2016 but still it registered a net loss of $2.8 billion.
"We are now officially in a tech bubble larger than March of 2000," said Wright.
Some 76 percent of the companies that went public in 2017 were unprofitable on a per-share basis in the year leading up to their initial offerings, data compiled by Jay Ritter, a professor at the University of Florida's Warrington College of Business, has shown. It's the largest number since the peak of the dot-com boom in 2000, when 81 percent of newly-public companies were unprofitable.
The number of IPOs filed in the United States has dropped to the lowest since 2012. Some 275 IPOs have been filed in 2014; the figure fell to 105 in 2016. There were just a few successes in the 2017 IPO market.
Several high-profile billion-dollar start-ups such as BuzzFeed missed their 2017 year-end revenue targets, according to the Wall Street Journal.
"If you intend to invest in a unicorn IPO anytime soon, think twice," Wright warned. "And if you haven't taken a close look at your 401(k) or IRA retirement plan investments, check to see what those mutual funds have been dabbling in."
More recently - well yesterday in fact, Tech Crunch reported that Facebook shares lost US$120 billion in market capitalising, following a poor second quarter earnings report and evidence of slowing growth in number of users.
This is not surprising, since exponential growth in number of users is a temporary phase for any social media and Internet company and at some point, growth will level off and perhaps even decline, as users either drop out, become increasingly inactive or move to newer sites.
This is similar to the lifespan of shopping malls and department stores in Malaysia since the 1970s and 1980s, where they have risen to the height of prominence and popularity, gradually faded into obscurity and even closed down - such as Ampang Park, Malaysia's first mall, which opened with a bang in 1973 and became "the place to be". then began its slow and steady decline, with clear signs of being rather run down, as newer and more modern malls drew away its customers, until it was finally closed down recently to make way for the MRT.
techcrunch.com
Facebook loses $120 billion in market cap after awful Q2 earnings
Josh Constine
26 July 2018
Facebook's share price fell more than 20 percent in after-hours trading today after the company announced its slowest-ever user growth rate and a scary warning that its revenue growth would rapidly decelerate. Before today's brutal Q2 earnings, Facebook's share price closed today at $217.50 — a record high — but fell to around $172 after the earnings call. That's a market cap drop of roughly $123 billion. In two hours, Facebook lost more value than most startups and even public companies are ever worth.
Here's the full story on Facebook's disastrous Q2 2018 earnings:
So why did Facebook's share price sink like a stone? There are five big reasons:
Slowest-ever user growth rate – Facebook's monthly user count grew just 1.54, compared to 3.14 last quarter. Daily active users grew even slower at 1.44 percent, compared to 3.42 percent last quarter. For reference, 2.18 percent was its previous slowest DAU growth rate back in Q4 2017. Suddenly hitting this wall could limit Facebook's total user count over the long-run, and its revenue with it. Facebook tried to distract from these facts by announcing a new "family of apps audience" metric of 2.5 billion people using at least one of its apps, which will hide the shift of users from Facebook to Instagram and WhatsApp.
User count shrank in Europe, flat in U.S. & Canada – Facebook saw its first-ever decline in monthly user count in Europe, from 377 million to 376 million. It got stuck at 241 million in the U.S. and Canada after similarly pausing at 239 million in Q4 2017. Those are Facebook's two most lucrative markets, with it earning $25.91 per user in North America and $8.76 in Europe. If those markets stall, even swift growth in the Rest of World region, where it earns just $1.91 per user, won't save it.
Decelerating revenue growth – Facebook's revenue grew a remarkable 42 percent year-over-year this quarter. But CFO David Wehner warned that metric would decelerate by high single-digit percentage per quarter over the coming quarters. Wehner said a combination of currency headwinds, new privacy controls and new experiences like Stories will contribute to the deceleration. This news is what caused Facebook's share price to drop from -7 percent to -20 percent.
Privacy and well-being – Q2 saw the debut of Europe's GDPR that forced Facebook to change its privacy policies and get users to agree to how it collects data about them. Wehner blamed GDPR for Facebook loss of users in Europe. That law and Facebook's Cambridge Analytica scandal led the company to have to improve its privacy controls. These could make it tougher for Facebook to target people with ads or show their content to more people.
Meanwhile, Facebook has continued to adopt the "Time Well Spent" philosophy, removing click-bait news and crappy viral videos that lead to passive internet content consumption that studies say is unhealthy. Instead, Facebook is pushing features like Watch Party, where users actively interact with each other. Those might not produce as much time on site and subsequent ad views, but CEO Mark Zuckerberg said the changes are "positive and we're going to continue in this direction."
The shift to Stories – Facebook estimates that by 2019, sharing via ephemeral vertical Stories slideshows will surpass sharing via feeds. The problem is that advertisers may be slower than users to make that shift. "Will this monetize at the same rate as News Feed? We honestly don't know," COO Sheryl Sandberg said. Stories ads might be full-screen and more immersive, but they don't show off links to online stores, nor are they as well-optimized from decades of banner ad experience by the industry.
Luckily, even though Snapchat invented the Stories format, Facebook has far more people using it each day, with 150 million Stories users on Facebook, 70 million on Messenger, 400 million on Instagram and 450 million on WhatsApp. If Facebook does manage to figure out Stories ads, it could dominate, but it could take years for its advertiser count and ad prices to rise to offset the shift away from feeds.
Oh! I love Styxhexenhammer666' description of Facebook's shares "going down the shitter".
"Scumbag NYT Opposes Free Speech, Applauds Facebook as Facebook Begins to Decline Sharply"
Russia Today of 28 July 2018 warns that the declining profits of well known technology-based giants could have serious adverse financial impact on the world.
rt.com
How dangerous are tech giants that don't make profits (VIDEO) — RT Business News
28 Jul 2018 at 14:35
Tech giants like Tesla, Uber, or Spotify are making less and less profit at the moment and experts are worried about their impact on the world. Are we seeing a new economic bubble in the making? RT's Daniel Bushel finds out.
American tech corporations are often making headlines nationwide and internationally, although their own performance is far from perfect. They lose more and earn less, and experts warn of a potential "bubble" looming in the horizon.
Tesla, Elon Musk's flagship company, is worth more than Ford or GM, but produces only a small number of cars. Spotify, a music streaming service, as well as Uber, are losing billions of dollars every year.
"Definitely, there's a bubble, not just in tech stocks but in general stock market itself," Jack Rasmus, professor of political economy at St. Mary's College, told RT, warning that "there are signs of financial fragility" that endanger the world.
Suing people, companies and government over various issues, sometimes trivial issues to us Malaysians, however is big in the United States, which keeps lawyers laughing their way to the bank.
Well, Reuters of 28 July 2018 reports that in the wake of the company's poor second quarter performance, Facebook, its CEO Marc Zuckerberg and its Chief Financial Officer David Wehner face a class action suit over allegations that they had made "misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users".
reuters.com
Facebook is sued after stock plunge 'shocked' market
Jonathan Stempel
28 July 2018 at 4:43 AM
NEW YORK (Reuters) - Facebook Inc (FB.O) and its chief executive Mark Zuckerberg were sued on Friday in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth.
The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users.
Kacouris said the marketplace was "shocked" when "the truth" began to emerge on Wednesday from the Menlo Park, California-based company. He said the 19 percent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants.
The lawsuit seeks class-action status and unspecified damages. A Facebook spokeswoman declined to comment.
Shareholders often sue companies in the United States after unexpected stock price declines, especially if the loss of wealth is large.
Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the U.K. firm Cambridge Analytica. Many have been consolidated in the federal court in San Francisco.
Thursday's plunge also hit Zuckerberg's bottom line.
Zuckerberg had been tied with Warren Buffett as the world's fourth-richest person, but the Berkshire Hathaway Inc (BRKa.N) chairman's current $83 billion fortune tops Zuckerberg's $66 billion, Forbes magazine said.
FB.O
Buffett now ranks third among the world's billionaires, while Zuckerberg is sixth.
Facebook shares fell another 0.8 percent on Friday, closing at $174.89 on the Nasdaq.
The case is Kacouris v Facebook Inc et al, U.S. District Court, Southern District of New York, No. 18-06765.
Reporting by Jonathan Stempel in New York; Editing by Susan Thomas
Besides Facebook, the price of Twitter shares dropped 20% following a decline in its number of monthly users over its second quarter 2018, ABC reported on 28 July 2018.
abc.net.au
Twitter shares plunge 20 per cent after company reports decline in monthly users
Posted at Sat 28 Jul 2018, 11:08am
Twitter's market value plunged by $US6 billion after it reported a decline in its monthly users over the second quarter of 2018.
The company's stock dropped 20.5 per cent after it warned the number of users could fall further in coming months as it continued to crack down on hate, abuse and online trolls.
Twitter said it was putting the long-term stability of its platform above user growth by cracking down on abuse.
That leaves investors seemingly unable to value what the biggest companies in the sector — which rely on their potential user reach — are worth.
Now valued at $US26 billion, Twitter's drop came one day after Facebook lost 19 per cent of its value in a single day.
Facebook lost $US119 billion in value, but investors still value Facebook at $US503 billion.
Twitter's decline in audience from 336 million monthly users in the first quarter to 335 million in the second quarter overshadowed a strong monthly user growth of 3 per cent compared with the previous year.
Twitter's second-quarter net income also hit $US100.1 million, after a loss last year during the same period.
This is the company's third profit in a row and the third it has ever posted.
Despite Twitter suffering its second-worst loss since it went public in November 2013, the stock has still doubled in value over the last 12 months.
Long criticised for allowing bad behaviour to run rampant on its platform, Twitter is now attempting to rein in the worst offenders.
At the same time, it must convince people it is the go-to platform in social media, even though it is dwarfed right now by Facebook.
Facebook has more than 2.23 billion users, while its apps WhatsApp, Instagram and Messenger each have over 1 billion users.
Twitter has reiterated its efforts "to invest in improving the health of the public conversation" on its platform, making the "long-term health" of its service a priority over short-term metrics such as user numbers.
As part of these efforts, Twitter said that as of May, its systems identified and challenged more than 9 million accounts per week that were potentially spam or automated, up from 6.4 million in December 2017.
A Washington Post report put the total number of suspended accounts in May and June at 70 million.
The Associated Press also found that Twitter suspended 56 million such accounts in the last quarter of 2017.
AP/ABC
And, Styxhexenhammer666 believes that the prices of stocks of social media companies such as Facebook and Twitter are overvalued and that we could soon see a bust soon.
"Twitter Stock Collapses 18% In a Day: Social Media Bubble Incoming?"
Let's face it. Just like professional athletes, boxers, fashion models and malls, the glory days of social media companies are generally short - like 10 or maybe 20 years, after which they gradually decline or fade away.
At least the popularity of those 24-hour eateries in Malaysia - even those that wash their dishes in the toilet bowl - remain popular with the public and profitable as ever with Malaysia's eating public.
Yours truly
IT.Scheiss
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